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Tuesday, 8 May 2012

Islamic finance offers comprehensive and competitive solution

KUALA LUMPUR: In serving the needs of the real economy, Islamic finance offers a comprehensive and competitive solution in meeting funding and investment requirements of businesses, said Tan Sri Dr Zeti Akhtar Aziz, the Governor of Bank Negara Malaysia.

She also said that given its international outreach and dimension, and ability to provide a total financial solution, Islamic finance is now at the frontier in which it presents new opportunities to support the economy and overall financial stability. Zeti said this in a keynote address at the EU-Malaysia Chambers of Commerce and Industry’s (EUMCCI) Quarterly Financial Panel Discussion 2012.

“Despite the challenging global environment and the increased uncertainties, the Islamic finance industry has continued to experience a double-digit growth of 21 per cent, and total syariah-compliant assets have surpassed the US$1 trillion mark. There are now more than 600 Islamic financial institutions operating in more than 75 countries in both Muslim and non-Muslim jurisdictions.

“The emergence of new financial centres in Asia and the Middle East and their increased connectivity has strengthened the foundations for intra and inter-regional linkages in trade and investments,” she added.

Zeti said the now well-developed existing Islamic financial markets, including the sukuk and Islamic money markets, have been particularly instrumental in intermediating funds in the Islamic financial system.

“It is fast becoming an important platform for international fund raising and investment activities that are generating increased cross-border flows.

From an outstanding amount of US$33 billion in 2006, the sukuk market has expanded to US$180 billion as at end-2011.

“Malaysia’s supportive framework and process for sukuk origination and sukuk listing also facilitates the issuance process of ringgit or non-ringgit denominated sukuk in our market.

“Efforts to deepen the sukuk market have provided significant opportunities for participation in this market, with the size of the Malaysian sovereign and corporate sukuk outstanding growing three-fold, from a total of RM120 billion in 2005 to RM353 billion as at end-2011,” she added.

Zeti said key to the development of Islamic finance in Malaysia, has been its progressive internationalisation and the introduction of more innovative Shariah-compliant financial solutions, that meet the increasingly more complex and diverse international business requirements.

She also drew attention to the fact that Islamic finance, which was previously domestic-centric, is now increasingly providing financial solutions for cross-border trade and investment.

“Progressive liberalisation has facilitated the internationalisation of Islamic finance.

“This has been reinforced by the dynamic pace of innovation in Islamic finance that has widened the range of financial products and services,” she added.

Zeti said Islamic finance has thus become an increasingly important channel for the efficient allocation of funds across borders and the diversification of risks. — Bernama